Understanding Opportunity Costs and Maximizing Happiness for Better Financial Decisions
In a world filled with choices, individuals often struggle to pinpoint what truly makes them happy. UCLA Anderson School of Management introduces HappyAppy.com, an online service designed to optimize spending and saving decisions by considering opportunity costs and aligning financial choices with personal happiness. Through steps like The Happy Test and presenting alternative options, individuals can make more informed decisions that lead to greater happiness and long-term fulfillment.
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Opportunity Costs and Happiness Stephen Lynch, Ashley Zimmer, Matthew McCloskey UCLAANDERSON SCHOOL OF MANAGEMENT
The Big Idea We live in a world where I don t know what I want . there are dizzying amount of options and choices. Individuals do See full size image not truly understand what makes them happy. The behavior is manifested in sup- optimal time allocation Can someone help me with my spending decisions? and spending decisions. UCLAANDERSON SCHOOL OF MANAGEMENT
The Big Idea An online service that www.HappyAppy.com seeks to optimize spending and saving http://t0.gstatic.com/images?q=tbn:5p4QzpxPStkhxM:http://winthropharborfest.com/wp-content/uploads/2010/02/Smiley-Face-with-Dollar-Sign-eyes.bmp decisions as they relate to an individual s happiness. By understanding the fundamentals of clients happiness, HappyAppy.com hopes Helping you optimize spending and saving decisions to maximize happiness. to alter customers spending decisions by presenting opportunity costs of their financial decisions. UCLAANDERSON SCHOOL OF MANAGEMENT
Step 1: How it works: The Happy Test The Happy Test: How it works I am happiest when Comprehensive online test Considers material items, events and no-cost activities The Happy Test will diagnose the items and events that make you the happiest. Individual Happy Profile to maximize happiness http://t1.gstatic.com/images?q=tbn:fO9pDpET8ah0WM:http://www.flreia.com/clubportal/images/clubimages/2076/webpages/Question%2520mark%2520funny%2520face.jpg UCLAANDERSON SCHOOL OF MANAGEMENT
Step 2: Presenting Alternative Options http://t0.gstatic.com/images?q=tbn:5p4QzpxPStkhxM:http://winthropharborfest.com/wp-content/uploads/2010/02/Smiley-Face-with-Dollar-Sign-eyes.bmp Simple to use program that shows consumers Happy Appy alternative choices that will bring about the most Smart Phone App Access your profile Scan item with barcode scanning app and input product info into app. Program analyzes fits in happiness profile. Program offers alternatives for same price but higher happiness or how the money could be used for long-term savings goals. happiness. UCLAANDERSON SCHOOL OF MANAGEMENT
Step 3: Alternative Purchase & Savings Example Consumer will scan a product that they are considering purchasing and I Want It Now!!! I Want It Now!!! press the number of smiley Potential Purchase Shoes $200 faces to indicate how happy the product would make them. UCLAANDERSON SCHOOL OF MANAGEMENT
Step 4: Alternative Purchase & Savings Example Happy Appy will then show how much money that purchase would contribute What about this What about this to the consumer s retirement account and Potential Purchase Shoes $200 other items with their Saved by Retirement $7,194 happiness factors. Happy Factor Happy Rank Alternatives Cost Purse Shoes Dress Movie $458 $200 $100 $30 5 6 8 1 1.1 3.0 8.0 3.3 UCLAANDERSON SCHOOL OF MANAGEMENT
Step 5: Track Progress Monthly summaries of spending habits. Idea: demonstrate progress (both spending decisions and savings goals) will encourage continued use and reinforce improved spending habits Part of www.HappyAppy.com/ would be a progress tracker that demonstrates to users how the program has changed their spending decisions for the better (hopefully). UCLAANDERSON SCHOOL OF MANAGEMENT
Behavioral Concepts Addressed This product is designed to Bias Solution help people stop making People do not know what makes them happy. The quiz helps people to identify the items/activities/investments/savings that bring them more happiness. bad financial spending decisions that ultimately do Affect Heuristics Avoid impulse buying and recognize opportunity costs that will lead to more personalized happiness. Prevents an emotional evaluation of a purchase before conscious reason. not provide more happiness. Opportunity Costs / Sub-Optimal Spending Helps to determine personalized preferences and assign a value to each of the preferences. Intuitive v. Deliberate Self Helps to try to get people to avoid impulse purchases and try to tap into deliberate purchases. Mental Accounting Avoid using easy shortcuts to determine the cost of something and to realize the opportunity costs. Inertia (savings) Providing the consumer with knowledge of how the money can be used differently with different types of investments, etc. UCLAANDERSON SCHOOL OF MANAGEMENT
Projected Revenue Projected Transaction Revenue Forecasted Revenue will come from two sources: 1) No. of 1% Avg. Purchases Per Year 10 15 25 Service Charge 1% 1% 1% every time a consumer Year 2011E 2012E 2013E No. of Users Purchase $ 75 $ 100 $ 110 Total Revenue $ 75,000 $ 600,000 $ 2,062,500 10,000 40,000 75,000 chooses an advertised product that brings them more happiness than the original product and 2) Projected Advertising Revenue No. of Advertisers yearly fees from consumer Year 2011E 2012E 2013E Yearly Fee $ 5,000 $ 5,000 $ 5,000 Total Revenue $ 250,000 $ 375,000 $ 750,000 50 75 product advertisers. 150 UCLAANDERSON SCHOOL OF MANAGEMENT
Questions? UCLAANDERSON SCHOOL OF MANAGEMENT
